Guotai Junan Securities (Hong Kong), a subsidiary of Guotai Junan International, has become the first Chinese-mainland brokerage in Hong Kong to win approval to provide virtual-asset trading services.

The company said on Wednesday the city’s Securities and Futures Commission gave the nod for the move on Tuesday, upgrading the firm’s Type 1 license for dealing in securities to provide virtual-asset dealing services under an omnibus account arrangement with SFC-licensed platforms.

With the upgraded license, investors can gain access to trading in major digital currencies, including bitcoin, ethereum and stablecoin through Guotai Junan Securities’ services.

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The announcement sparked a rally in Guotai Junan International’s shares, which skyrocketed by nearly 200 percent to close at HK$3.7 (47 US cents) on Wednesday.

Hua Chuang Securities said the SFC approval came sooner than expected, and predicted that more mainland brokerages with international branches will follow suit to upgrade their Type 1 licenses. The firm said leading brokerages that have strong client bases are particularly likely to expand their respective businesses into the field of digital assets.

In light of the favorable factors in Hong Kong, including a strengthening regulatory framework and the growing number of participants, Hua Chuang Securities said it is confident in the continuous improvement of the city’s virtual-asset ecosystem.

Futu Securities in a report echoed this view, saying that stablecoin could drive the scaling-up of Chinese brokerages’ international operations, as current regulations prevent them from conducting virtual asset-related business on the mainland.

The development of stablecoin could redefine the role of brokerages, and they have the potential to promote asset securitization and act as hubs for cross-border clearings in the future, instead of simply as trading intermediaries, Futu said. This would help enhance these firms’ valuations, it added.

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Terence Chong Tai-leung, executive director of the Lau Chor Tak Institute of Global Economics and Finance at the Chinese University of Hong Kong (CUHK), said the enrichment of virtual asset trading services in Hong Kong — whether they are backed by mainland, local, or foreign funds — is conducive to the city’s advancement in finance and fintech.

Contact the writer at irisli@chinadailyhk.com